Higher Education Funding

Darren Paffey Excerpts

Wednesday 28th October 2026 Westminster Hall

[Darren Paffey (Southampton Itchen) (Lab)]

It is a pleasure to serve under your chairship, Ms Vaz. I congratulate my hon. Friend the Member for Sheffield Central (Abtisam Mohamed) on securing this important debate.

Southampton is home to two excellent universities and yet in my constituency, only 7% of kids on free school meals will hold a degree by the time they are 22. Of those who do not receive free school meals in Itchen, just 19% will get there. If we go a few miles up the road to Winchester, however, that become 39%. We must make sure that higher education is not shut down as an option for young people. In my speech, I will focus on three points that are becoming worryingly clear about the funding system as it stands: it is not working for students, it is not working for universities, and—I fear—it is working only for the Treasury. I do not believe that is what this Labour Government are about.

First, on students, I was the first in my family lucky enough to go to university. I started in 2000 when fees were—wait for it—£1,025. My annual loan was about £3,500. We looked enviously on the generation before us, who did not pay fees and who received a grant to go to university. This generation is looking enviously on my generation, which is worrying. I went on to spend 20 years as university lecturer, so I saw every subsequent wave of student finance agreements. The Treasury Committee has concluded that we were essentially mis-selling some of the previous loan agreements on terms that no commercial lender would ever be allowed to offer.

[Dr Arthur]

I know I do not look it, but when I went to university, Margaret Thatcher was still our Prime Minister. Does my hon. Friend agree that it is incredible that funding for students’ day-to-day living costs was better then than it is today.?

[Darren Paffey]

My hon. Friend makes an absolutely salient point. Many of us never imagined that we would get to an even worse place, but here we are.

Only the top three earnings deciles of recent intakes will ever pay off their student loans in full. The nurse, the teacher or the engineer on £35,000 will pay 9% for decades and still never clear the balance. Dare I say it, but if it walks like a tax and quacks like a tax, let us call it a tax and treat it as one. If we properly sort it, it could well be a better deal than the current loan system.

[John Slinger (Rugby) (Lab)]

My hon. Friend is making a very compelling speech. I wonder if he noticed the coverage in The Telegraph, which reported that graduates on the minimum wage will be making repayments on three out of the five student loan plans from next year onwards. Does he agree that this, in many ways, breaks our social contract with the student population, who were essentially told that they would earn a huge amount more and should therefore contribute to their higher education?

[Darren Paffey]

I agree that this is not the deal that I think our country wants to offer its young people, particularly if the Government are about breaking down barriers to opportunity.

Secondly, on universities, the Office for Students reported in May that more than a third of English higher education institutes were already in deficit last year, and that if recruitment simply flatlines, nearly six in 10 could be in deficit within five years. International student numbers, as hon. Members have stated, fell by around 45,000 last year, and student visa applications in the first months of this year were down by a third.

In May, the Education Committee, which I sit on, warned of the real threat of insolvency. Universities such as those in my constituency—the University of Southampton and Southampton Solent University—are anchors of our local economy, and that is reflected around the country. We cannot afford to let them fail. They are not immune to the job losses that are affecting other HEIs.

Thirdly, I turn to the taxpayer. The Government estimate that the state meets 35% to 40% of the cost of higher education. Others take a different view: the Institute for Fiscal Studies put the figure for the 2022 cohort at around 3%, with 97% of the cost met by students. Sir Philip Augar recommended a 50:50 split. Whichever number we look at or choose to believe, we are a long way from the balance that Parliament intended, and the bill is quietly being passed to young people.

That brings me to the international student levy. Don’t get me wrong, I absolutely welcome the return of maintenance grants—for families on low incomes, they really matter—but a grant of up to £1,000 a year amounts to about £20 a week, and it is to be funded by a levy of £920 per international student from 2028. Last November, that was forecast to raise £445 million in its first year, but that forecast was made before visa applications fell by a third. I fear that a grant that depends on a shrinking tax base is a good intention built on sand. Before the levy legislation completes its passage, will the Minister commit to publishing an updated forecast of what it will raise based on today’s recruitment figures? Will she confirm that maintenance grants will be protected if they fall short?

Finally, the Government have said that the whole student finance system is under review, and I welcome that news enthusiastically. Will the Minister set out how and by when that review will report, and whether it will move us back towards a fair balance between the state and the individual? As hon. Members have very eloquently said, this is all about intergenerational justice. It is about whether 22-year-old me would look at university and say, “Yeah, I can risk that,” or whether I would now be more likely to say, “Nah, my family has never done that and I simply cannot afford it.” It is about growth and the 7% of kids in Itchen, and more across this country, who deserve better opportunities and better odds.